Antonelli C. (2006). Localized technological change and factor markets: constraints and inducements to innovation, Structural Change and Economic Dynamics, 17: 224-247
What is the motivation from an economic point of view? What is/are research question/s?
Progress in: induced technological change approach —> new insights about what determines the rate and direction of technological change
Analysis of interaction between composition effects and technological change and the notions of general and contingent technological change —> important dynamic implications
Results
Inducement hypothesis —> assumes that firms generate new technologies when factor costs change
In the developed approach, in fact, any increase in wages induces the generation of new technology, because of the disequilibrium effects of irreversibility of the factors of production and related switching costs
The developed framework provides a microeconomic tool with which to understand the role of relative prices as determinants of the direction of technological change at the level of the system
Conclusion
Traditional analysis of the economics of technical change
Introduction of technological change: Substituting an old technical area with a new one
Inducement approach
Microeconomic model
Changes in factor prices —> basic inducement —> rate of technological change
Macroeconomic model
Level of factor shares —> relative factor prices —> technological change at the aggregate level
Economics of localized technological change —> integrates the two approaches
Composition effects
depend on relative prices in each factor market
determine the consequences of introducing technological change in each regional system, and are characterized by the specific system of relative factor prices in two ways
International competition —>change of direction of technological path
Introduction of new technology: Result of an out of equilibrium situation —> forces the firm to innovate
The induced approach and its inconsistency can be improved by
considering
composition effects in the global economy
what determines and limits the localized introduction of innovation when there are effects of irreversibility, limited knowledge and learning
Define effect of relative factor prices on total costs and TFP levels
Stronger when there are changes in technology and factor costs
Important role in the
analysis of technological change
in different industries and countries
because of the strong effects relative prices have on the overall growth of factor productivity
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